2 Regulatory Concerns For Canadian Dealers
Ontario’s all-in pricing regulation is still causing trouble for dealers, and the issue is top-of-mind for Ontario Motor Vehicle Industry Council management.
In fact, the organization put out another bulletin on the issue just this spring, reminding dealers “there can be no hidden fees; no surprises.”
And to get a handle on the top regulatory issues facing dealers today, Auto Remarketing Canada caught up with Michael Rothe, director of legal services at OMVIC, at the recent Auto Remarketing Canada Conference in Toronto.
Not surprisingly, perhaps, Rothe said all-in pricing should be No. 1 in dealers’ minds when it comes to regulations, and issues with negative equity and subprime financing are a close second.
“All-in pricing continues to be an issue, and it really requires the industry to work with the regulator because we don’t want to race toward the lowest common denominator,” said Rothe.
With the exception of the harmonized sales tax (HST) and licensing cost — which can be excluded is the advertisement indicates as such — the price advertised should be the price a customer can expect to pay, without any surprises.
Examples of fees or charges that must be included in an advertised price include:
- PDI-PDE (pre-delivery inspection/expense)
- Administration (Admin) fee(s)
- Government levies (air tax, etc.)
- OMVIC fee
- Safety and e-test (unless the ad contains a mandated "Unfit Vehicle" or "As-Is Vehicle" statement)
Dealers must also include fees they intend to charge for products or services they have pre-installed on a vehicle, including warranties, tire protection packages and more.
“If everyone is secure with the rule, it creates a more level playing field, and I think is better for the industry overall, not just consumers,” Rothe said.
If dealers already have all-in pricing down, Rothe cited a few financing concerns that may cause some trouble in the future.
“The second most important issue is financing,” said Rothe, “and by that I mean subprime financing, negative equity and loan duration.”
Since the recession and the leasing fall-off, loan terms have been getting consistently longer. And Rothe explained the issue is not in a vacuum — and the auto industry isn’t the only business on this trajectory.
“Again, it is very difficult issue and some ways a more difficult one, because it’s not just an automotive sector. You also have the banks, insurance companies, and other sectors impacting it, so it’s not just OMVIC coming up with a solution to that end,” Rothe said.
OMVIC has reached out to various banking regulators on a provincial and national level to try and craft a “holistic” solution to the financing issue.
“But again, these things take time, and this is a fast developing issue,” said Rothe, and one that the industry, and country, have to work together to solve.
In the automotive business the long duration of vehicle loans have the potential of cannibalizing future sales.
“With extremely lengthy loan terms, dealers are padding their bottom line today at the expense of their bottom line down the road,” Rothe concluded.